In addition to acting, Khan is a humanitarian and has participated and spoken out for various social causes, some of which have sparked political controversy. He has created and hosted the television talk show Satyamev Jayate, through which he highlights sensitive social issues in India. Khan was married to his first wife, Reena Dutta, for fifteen years, after which he married the film director Kiran Rao. He has three children—two with Dutta, and one with Rao through surrogacy.

Khan was born on 14 March 1965 in Mumbai to Tahir Hussain, a film producer, and Zeenat Hussain.[8][9] Several of his relatives were members of the Hindi film industry, including his late paternal uncle, the producer-director Nasir Hussain.[9] He is related to the Indian philosopher Abul Kalam Azad who is related to him through his grandmother.[10][11] Khan is the eldest of four siblings; he has a brother, the actor Faisal Khan, and two sisters, Farhat and Nikhat Khan (married to Santosh Hegde).[12][13][14] His nephew, Imran Khan, is a contemporary Hindi film actor.[15]

As a child, Khan appeared on screen in two minor roles. At the age of eight, he appeared in a highly popular song in the Nasir Hussain-directed musical film Yaadon Ki Baaraat (1973).[16][17] The following year, he portrayed the younger version of Mahendra Sandhu's character in his father's production Madhosh.[16] Khan attended J.B. Petit School for his pre-primary education, later switching to St. Anne's High School, Bandra till the eight grade, and completed his ninth and tenth grade at the Bombay Scottish School, Mahim.[18]He played tennis in state level championships, and has professed being "much more into sports than studies".[18][19] He completed his twelfth grade from Mumbai's Narsee Monjee College.[20] Khan described his childhood as "tough" due to the financial problems faced by his father, whose film productions were mostly unsuccessful. He said, "There would be at least 30 calls a day from creditors calling for their money." He was always at risk of being expelled from school for non-payment of fees.[21]

At the age of sixteen, Khan was involved in the experimental process of making a 40-minute silent film, Paranoia, which was directed by his school friend Aditya Bhattacharya.[22] The film was funded by the filmmaker Shriram Lagoo, an acquaintance of Bhattacharya, who provided them with a few thousand rupees.[23] Khan's parents did not want him to make films, wishing that he would instead pursue a "steady" career as an engineer or doctor.[22] For that reason, the shooting schedule of Paranoia was a clandestine one.[24] In the film, he played the lead role alongside actors Neena Gupta and Victor Banerjee, while simultaneously assisting Bhattacharya.[23] He said that the experience of working on it encouraged him to pursue a career in film.[25]

Khan subsequently joined a theatre group called Avantar, where he performed backstage activities for over a year. He made his stage debut with a small role in the company's Gujarati play, Kesar Bina, at Prithvi Theatre.[23][26] He went on to two of their Hindi plays, and one English play, which was titled Clearing House.[27] After completing high school, Khan decided to discontinue studying, choosing instead to work as an assistant director to Nasir Hussain on the Hindi films Manzil Manzil (1984) and Zabardast (1985).[22][28]